Winners Circle, Inc., manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 2,600 medals each month. Current monthly production is 1,950 medals. The company normally charges $515 per medal. Variable costs and fixed costs for the current activity level of 75 percent of capacity are as follows:

Production Costs
Variable costs:
Manufacturing:
Direct labor	$	273,000
Direct material		204,750
Marketing		146,250
Total variable costs	$	624,000
Fixed costs:
Manufacturing	$	207,300
Marketing		143,700
Total fixed costs	$	351,000
Total costs	$	975,000
Variable cost per unit	$	320
Fixed cost per unit		180
Average unit cost	$	500

Winners Circle has just received a special one-time order for 650 medals at $290 per medal. For this particular order, no variable marketing costs will be incurred. Cathy Donato, a management accountant with Winners Circle, has been assigned the task of analyzing this order and recommending whether the company should accept or reject it. After examining the costs, Donato suggested to her supervisor, Gerard LePenn, who is the controller, that they request competitive bids from vendors for the raw material as the current quote seems high. LePenn insisted that the prices are in line with other vendors and told her that she was not to discuss her observations with anyone else. Donato later discovered that LePenn is a brother-in-law of the owner of the current raw-material supply vendor.

2-a. Compute both the new average unit cost and the incremental unit cost for the special order. 2-b. Should Winners Circle, Inc. accept the special order?

3 .Which of the following costs will be relevant to Cathy Donatos analysis of the special order being considered by Winners Circle, Inc.?

3. Identify the considerations that Donato should include in her analysis of the special order.

3a.Which of the following statements are true regarding Donato's possible response to the ethical conflict arising out of the controllers insistence that the company avoid competitive bidding?